2019 (4) TMI 514 - HC - Income Tax

Penalty u/s 271E - violation u/s 269T - limitation to pass penalty order u/s 275(1) - rectification order passed u/s 154 can extend limitation - HELD THAT - As foundation for the proceedings lies not in any order passed on a statutory appeal or revision, it is the stipulations present in Section 275(1)(c) which would govern the present contest. A plain reading of the provisions would confirm that the statutory authority concerned, is restrained from passing any order of penalty beyond the expiry of a financial year in which a proceeding which has led to the penalty proceeding has been completed or within six months from the end of the month in which a penalty proceeding has been initiated, whichever expires later. A plain reading of various circumstances discussed u/s 275 of the Act would confirm that a plea of a pending proceeding u/s 154, does not suffice for explaining a delay in passing the final order because this situation does not find mention in either of the situations discussed. The entire proceedings initiated for imposition of penalty under Section 271E for alleged violation of Section 269(T) is barred by limitation as prescribed u/s 275(1)(c) - Decided in favour of assessee.

Summary

Issues Involved:
Initiation of penalty proceedings under Section 271E of the Income Tax Act, 1961 for alleged violation of Section 269T - Compliance with the prescribed period for passing final orders under Section 275(1)(c) of the Act.

Detailed Analysis:

1. Initiation of Penalty Proceedings under Section 271E:
The case involves the initiation of penalty proceedings under Section 271E of the Income Tax Act, 1961, based on an alleged violation of Section 269T. The petitioner challenged the notice/order dated 27.11.2014, contending that the final order passed on 21.09.2016 exceeded the prescribed period under Section 275(1)(c) of the Act. The Department argued that delays were caused by the petitioner's engagement in other proceedings, but lacked supporting evidence.

2. Compliance with Prescribed Period under Section 275(1)(c):
Section 275 imposes limitations on the statutory authorities for passing penalty orders. The statutory authority is restricted from imposing penalties beyond the financial year in which the proceeding was completed or within six months from the initiation of the penalty proceeding, whichever is later. In this case, the penalty order dated 21.09.2016 was issued after the expiration of the prescribed period, as acknowledged by both parties.

3. Legal Precedent and Application of Delhi High Court Judgment:
The Court referenced a Delhi High Court judgment (2017) regarding the plea of limitation in penalty proceedings. The judgment highlighted the importance of adhering to the prescribed timelines under Section 275(1)(c) of the Act. The Court applied the principles from the Delhi High Court judgment to the present case, emphasizing the significance of timely imposition of penalties within the statutory limits.

4. Conclusion and Judgment:
Based on the undisputed facts and legal interpretations, the Court upheld the argument presented by the petitioner's counsel regarding the proceedings being time-barred under Section 275(1)(c) of the Act. Consequently, the Court quashed and set aside the penalty proceedings and the final order dated 21.09.2016. The writ petition was allowed in favor of the petitioner.

In summary, the judgment addressed the issues of initiating penalty proceedings under Section 271E for violation of Section 269T and the necessity to comply with the prescribed time limits under Section 275(1)(c) of the Income Tax Act, ultimately resulting in the quashing of the penalty proceedings due to exceeding the statutory limitations.